"The S&P 500 closed October with three consecutive weeks of gains, temporarily setting a record high around 6,920 points before slightly retreating to the 6,840 area by the end of the week. This upward momentum reflects a combination of expectations for Federal Reserve rate cuts, stronger-than-expected corporate earnings, and investors' "risk-on" sentiment during the year-end season. However, this optimism also comes with clear warnings, as valuations are now significantly higher than long-term averages, while the macroeconomic foundation still contains various uncertainties."
"Following its policy meeting on October 29, the Federal Reserve cut interest rates by 25 basis points, bringing the target range down to 3.75%-4.00%, in line with market expectations. Chairman Jerome Powell emphasized that this is not the beginning of a prolonged easing cycle and that future decisions will depend on inflation and labour market data. At the same time, the September CPI rose 3.0% year-on-year, slightly down from 3.1% in August, indicating that price pressures are cooling moderately."
"From a fundamental perspective, the Q3 2025 earnings season delivered better-than-expected results. According to FactSet (November 1, 2025), about 70% of S&P 500 companies have reported earnings, of which 77% beat EPS expectations and 62% exceeded revenue estimates. Average earnings growth reached 10.7% year-on-year, marking the fourth consecutive quarter of double-digit growth. However, the average EPS surprise was only 5.3%, below the five-year average of 6.6%. In contrast, the overall net profit margin reached 12.9%, a slight improvement from 12.8% in Q2."
The S&P 500 finished October with three consecutive weekly gains, peaking near 6,920 before settling around 6,840. Market gains were driven by expectations of Federal Reserve rate cuts, stronger-than-expected corporate earnings, and year-end risk-on investor sentiment. Valuations are notably higher than long-term averages while macroeconomic uncertainties remain. The Fed cut rates 25 basis points to a 3.75%-4.00% target on October 29 and signalled that further easing will depend on inflation and labour market data. Q3 2025 earnings showed broad EPS beats, 10.7% average earnings growth, and a modest improvement in net profit margins.
Read at London Business News | Londonlovesbusiness.com
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